ed, re Let say if the Asian countries default the loan, then what can the creditor do ?.
Well ed, that's why the IMF doesn't just hand all the money over all at once. Why do you suppose Suharto agreed to suspend many of the big govt infrastructure projects, among other things? Because the IMF suspended the next bailout pmt until they saw compliance with the agreed upon terms. The creditors (US, France, England, etc) are not naive. They give only what is needed right now, and keep monitoring the situation. The IMF, in the lender's seat, will dictate loan terms. If in the end the reforms fail and the Asian countries default, then what happens is they don't have good credit, and foreign investment money dries up, the Asian countries go back to a more closed economy. That's only a possible senario, but that's generally what happens when you default: Your credit is trashed, and you deal with whatever consequences follow.
Also, keep in mind that US only exports small % of product to Asia compared to the total GDP. So I don't think, even though Asia business is (and it is already) down sharply, that it will cause widespread recession here. My customers for my business are construction companies who are building only in the US.
The IMF is under no obligation to accept terms from the Asian countries. Obviously they need help and have accepted help. They can climb back, but not by doing things the "back to normal" way. That way obviously didn't work, so they have to try something different. THE PARTY IS OVER in SE Asia, ed. The sooner people begin to accept that, the sooner businesses can be begun to be rebuilt with more solid financial underpinnings.
DK |
